SMSF RELATED PARTY LOANS AND PROPERTY INVESTMENT

There has been significant press around Self Managed Superannuation Funds (“SMSF”) and Australian Property investment recently. It is arguable that every bank is jumping on the SMSF Property bandwagon with every bank now marketing a SMSF loan product.

Regardless of whether you choose to use a third-party loan, a related party loan, or a combination of both, you will be well served by using the services of Redwood Advisory to ensure you are in safe hands and to structure the transaction in an efficient, timely and compliant manner.

Many Australians are unaware of the benefits of related party loans and generally choose the most expensive option and engage a 3rd party lender. This article aims to outline the advantages and disadvantages of related party loans.

Firstly, lets consider the advantages of Related Party loans:
• You can use your available equity on property owned outside of super to on-lend to a SMSF instead of obtaining a loan from a third party. As compared to third party lenders, there are reduced upfront costs such as application and legal fees charged by major bank lenders which can incur a cost of up to $5000
• Lower interest rates than third party borrowing with the ATO now approving of zero per cent interest rates for related party loans which means the individual receives no taxable income from the arrangement and pays no tax.
• Simplified SMSF loan documentation and a lower interest rate than third party lenders
• Loan repayment terms are more flexible and easier to modify.

Like all structures it’s important to identify the disadvantages, which include:
• It is imperative to receive advice during the process which may be costly including structuring and drafting of the legal deed
• Opportunity cost of using your cash outside super

Ivan Filipovic

Ivan Filipovic is an experienced, independent Property, SMSF and Finance Expert and the founder of Redwood Advisory. Ivan has been educating and coaching investors for over 15 years and has built a successful property portfolio with a number of positive geared properties across Australia.
Ivan provides valuable and honest guidance by educating Australians on how to invest successfully protect yourself with knowledge, contact Ivan today for a complimentary consultation on 1300 790 110 or email ivan@redwoodadvisory.com.au

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Redwood is a specialist SMSF, Property and Finance provider that assists Australian's purchase property as an investment. We take the headaches out of investing in property. We are based in Melbourne and service Australia wide.

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This website contains information that is of a general nature only and has not taken into account your specific objectives, needs and financial situation. It is not intended to provide financial, investment, accounting, tax or legal advice, therefore you should seek advice from the respective qualified or licensed professional
before making any decisions. Redwood Advisory disclaims responsibility for reliance on information contained on this site